thoughts on international funds

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smoothnobody
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thoughts on international funds

Post by smoothnobody » Wed Aug 07, 2019 4:50 am

i'm holding VTI vanguard total stock market and VXUS total international stock market. i've only been holding for this year but i've noticed a couple things. VTI growth is roughly double VXUS. but when [the market dropped - mod oldcomputerguy] these last couple days they both dropped almost equally. the end result was my VTI was a little over breaking even while my VXUS was in the red a few grand. yesterdays gains pretty much showed the same trend VTI gains had a healthy lead over VXUS. i was looking at the YTD and the average annual returns for all of vanguards ETF and noticed all of vanguards US funds have a history of outperforming the international funds. this made me question whether i want international funds in my portfolio. i understand diversification. if international funds didn't have the same drops US funds do when markets are down, i could see the logic in holding international even if the gains aren't as strong. but when global markets freak out everything goes down the toilet equally. the only difference is international didn't have strong gains to begin with. this makes me think people are holding international just for the sake of diversification when some of us might be better off holding only US funds.

tea_pirate
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Re: thoughts on international funds

Post by tea_pirate » Wed Aug 07, 2019 6:20 am

Like clockwork, here is our weekly thread for everyone to argue over each other!

Diversification doesn't mean everything goes up equally. When you are diversified, you will always have a component of your portfolio that is performing worse. That does not mean that you should sell your losers and double down on your winners, that is known as performance chasing.

If anything the utterly absurd frequency of these threads should be taken as a sign that it's time to get into international. :beer

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Re: thoughts on international funds

Post by Silk McCue » Wed Aug 07, 2019 6:33 am

If you take time to read any of the endless threads on this subject you will find every perspective under the sun already in black and white.

The search bar is your friend.

Cheers

lostdog
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Re: thoughts on international funds

Post by lostdog » Wed Aug 07, 2019 6:52 am

tea_pirate wrote:
Wed Aug 07, 2019 6:20 am
Like clockwork, here is our weekly thread for everyone to argue over each other!

Diversification doesn't mean everything goes up equally. When you are diversified, you will always have a component of your portfolio that is performing worse. That does not mean that you should sell your losers and double down on your winners, that is known as performance chasing.

If anything the utterly absurd frequency of these threads should be taken as a sign that it's time to get into international. :beer
+1

OP,

Go ahead and drop VXUS. Cheaper shares for me. When international starts to out perform it will be too late for you to jump back in.

As stated above, long term diversified investors always have a lagging fund in their portfolio. If you want to drop the fund, you're no longer a long term diversified investor. You're a performance chaser.

In a few hours the performance chasers will chime in and try to defend their flawed logic, look into their imaginary crystal balls, talk about past performance and throw most of the boglehead principles out the window in defense of performance chasing.
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

prd1982
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Re: thoughts on international funds

Post by prd1982 » Wed Aug 07, 2019 7:18 am

I'm keeping my 25-30% international. However, I found the following recent Morningstar article interesting: https://www.morningstar.com/articles/94 ... areholders

It talks about the doctrine of shareholder value in the US. I do wonder if this has changed how US vs EU stocks have performed.

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Re: thoughts on international funds

Post by nisiprius » Wed Aug 07, 2019 7:25 am

Welcome to one of the most frequently, intensely, and inconclusively debated topics in the forum.

I want to say this, because I think many of us started out like you--I did. You are kidding yourself if you think you see patterns, or if you try to draw conclusions, from unsystematic observations of what your own holdings have been doing, on a day by day basis, over periods of six months--or even two or three years.

I honestly don't know if there are reliable patterns at all, but whatever you think you are seeing, the way you are doing it now is not reliable. The usual justifications for diversification depend completely on looking at long periods of time, by which I mean decades, and even in hindsight, in order to get the benefit you would have needed to stay the course steadfastly for decades.
i understand diversification. if international funds didn't have the same drops US funds do when markets are down, i could see the logic in holding international even if the gains aren't as strong. but when global markets freak out everything goes down the toilet equally.
You probably don't understand diversification. You probably have seen the disclaimer, "Past performance is no guarantee of future results?" Well, if you look for it, you will see another one, in any official fund material that uses the word "diversification:"

"Diversification does not ensure a profit or protect against a loss in a declining market."

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time. Even when everything is doing exactly what it was supposed to do in theory, a diversifier for US stocks will sometimes go up when US stocks go down. It will also sometimes go down when US stocks go down, up when US stocks go up, and down when US stocks go up. The evidence of past benefit shows up in statistics and numbers over long periods of time. The form it takes is, overall, a slightly smoother ride with the portfolio as a whole having slightly less volatility because the diversifier sometimes fills in gaps.

And, also, it sometimes shaves off peaks.

As for you, I can't say what you ought to do with regard to holding international stocks, but you should not form your opinions based on patterns of behavior you think you've seen day-to-day.
Last edited by nisiprius on Wed Aug 07, 2019 9:31 am, edited 2 times in total.
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Re: thoughts on international funds

Post by nisiprius » Wed Aug 07, 2019 7:43 am

P.S. Between 7/27/2019 and 8/5/2019,
$10,000 invested in VTSAX, Vanguard Total Stock Market Index fund fell to $9,397.21, i.e. -6%.
$10,000 invested in VTIAX, Vanguard Total International Stock Index Fund fell to $9,434.23, i.e. -5.6%.

Image

I'm sorry to tell you this, but a six percent loss over nine days is not "hitting the fan." If it really bothers you, you should be rethinking how much you have in stocks, not how much you have in international versus US.

Here's a decade, and I'm only showing you the fabulous bull market, not the global financial crisis of 2008-2009. This is a period of "steady" upward growth in the US stock market, that is one of the best in history.

Image

I'm too lazy to run actual numbers, but look at that little dip at the end. That's what just happened. How look at the rest of the chart. Now many times in ten years do you think you see dips of that size or more?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: thoughts on international funds

Post by bearcub » Wed Aug 07, 2019 7:48 am

Since I invested in the new Global Wellesley Fund, I have more International than Domestic stocks in my allocation. My third eye sees International doing well. LOL. Not, it is what it is. Retired with the two TIPS Funds also. Some would never go this route, I get it. Best wishes.

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Re: thoughts on international funds

Post by ruralavalon » Wed Aug 07, 2019 7:53 am

smoothnobody wrote:
Wed Aug 07, 2019 4:50 am
i'm holding VTI vanguard total stock market and VXUS total international stock market. i've only been holding for this year but i've noticed a couple things. VTI growth is roughly double VXUS. but when [the market dropped - mod oldcomputerguy] these last couple days they both dropped almost equally. the end result was my VTI was a little over breaking even while my VXUS was in the red a few grand. yesterdays gains pretty much showed the same trend VTI gains had a healthy lead over VXUS. i was looking at the YTD and the average annual returns for all of vanguards ETF and noticed all of vanguards US funds have a history of outperforming the international funds. this made me question whether i want international funds in my portfolio. i understand diversification. if international funds didn't have the same drops US funds do when markets are down, i could see the logic in holding international even if the gains aren't as strong. but when global markets freak out everything goes down the toilet equally. the only difference is international didn't have strong gains to begin with. this makes me think people are holding international just for the sake of diversification when some of us might be better off holding only US funds.
A few days performance is hardly a basis for any investing decision. In a diversified portfolio, there will always be an asset class the does worse than the others.

There is frequent, contentious debate here about investing in international stocks, opinions on allocation ranging all the way from 00% to 50% of stocks in international stocks. There is no clear and compelling evidence for any of these allocation opinions, which is why the debate is so heated and is never resolved.
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Re: thoughts on international funds

Post by tibbitts » Wed Aug 07, 2019 7:56 am

International vs. not seems to be a case of having to stake out a position and stick with it, or at the very least have some consistent algorithm you use to shift weights between one and another. I think the OP is at the stage of acting on "feelings" stemming from very short-term observations, which is likely to result in the worst-case performance.

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Re: thoughts on international funds

Post by smoothnobody » Wed Aug 07, 2019 8:22 am

nisiprius wrote:
Wed Aug 07, 2019 7:25 am
Welcome to one of the most frequently, intensely, and inconclusively debated topics in the forum.
i could tell by the tone in the first few posts. makes me appreciate thoughtful posts like yours.

anyways, i don't have enough experience to participate in this debate. i don't have enough information to form an opinion either way. i'm just thinking out loud and wondering what other people are thinking. when your whole years worth of gains is wiped out in a few days it puts doubt in your mind. i know 8 months is not enough time to make any conclusions but when i looked at all of vanguards funds going back to 2004 you don't need to be a pro to see the US has consistently been a better buy. it's like why am i betting on the team that's gotten it's $$$ kicked for the past decade? so i can be holding a winning ticket if the world catches up to the US in the next 5-10 years? makes me feel like i'm missing out on whats going on right now. i heard boggle didn't recommend international and neither does buffet. not sure if this is true but if it is i find that interesting.

thanks for sharing. have a nice day.

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Re: thoughts on international funds

Post by atdharris » Wed Aug 07, 2019 9:00 am

Bogle and Buffet do not recommend international stocks because they argue that S&P 500 companies have plenty of international exposure. I tend to agree, but I do hold about 15% of my equities in VEA/VWO, however, I am considering dropping VEA for a managed international fund. I do not see any compelling investments in the Eurozone and they have largely not been a part of the technology revolution that has driven gains in the US and far east over the last decade. Will that change? Who knows. It may never. I prefer tilting my overseas exposure to emerging markets.

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Re: thoughts on international funds

Post by Valuethinker » Wed Aug 07, 2019 9:12 am

atdharris wrote:
Wed Aug 07, 2019 9:00 am
Bogle and Buffet do not recommend international stocks because they argue that S&P 500 companies have plenty of international exposure. I tend to agree, but I do hold about 15% of my equities in VEA/VWO, however, I am considering dropping VEA for a managed international fund. I do not see any compelling investments in the Eurozone and they have largely not been a part of the technology revolution that has driven gains in the US and far east over the last decade. Will that change? Who knows. It may never. I prefer tilting my overseas exposure to emerging markets.
It's interesting that you think that BMW, or Siemens, have not been part of the technological revolution ;-). Airbus? High technology is *everywhere* it's not just in your phone. I can tell you that there are a lot of capital goods companies in Europe that are seriously high tech.

What you mean to say is that Europe lacks (mostly) big consumer-oriented internet companies - the FAANGs (+ Microsoft, which is more of a B to B company)?

Which is true. Converse is that if those go off the boil the US market might underperform. That was what happened 2000-08.

In other words, beware anecdotal observations that anyone can make. It's likely the market already takes those into account it in its valuations of companies.

The point about compelling investments in the Eurozone (or the UK for that matter) is that the market's view may be too pessimistic, and thus the valuations are too low. But we will only know that in retrospect - we live life going forwards, but reflect on it looking backwards.

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Re: thoughts on international funds

Post by atdharris » Wed Aug 07, 2019 9:25 am

Valuethinker wrote:
Wed Aug 07, 2019 9:12 am
atdharris wrote:
Wed Aug 07, 2019 9:00 am
Bogle and Buffet do not recommend international stocks because they argue that S&P 500 companies have plenty of international exposure. I tend to agree, but I do hold about 15% of my equities in VEA/VWO, however, I am considering dropping VEA for a managed international fund. I do not see any compelling investments in the Eurozone and they have largely not been a part of the technology revolution that has driven gains in the US and far east over the last decade. Will that change? Who knows. It may never. I prefer tilting my overseas exposure to emerging markets.
It's interesting that you think that BMW, or Siemens, have not been part of the technological revolution ;-). Airbus? High technology is *everywhere* it's not just in your phone. I can tell you that there are a lot of capital goods companies in Europe that are seriously high tech.

What you mean to say is that Europe lacks (mostly) big consumer-oriented internet companies - the FAANGs (+ Microsoft, which is more of a B to B company)?

Which is true. Converse is that if those go off the boil the US market might underperform. That was what happened 2000-08.

In other words, beware anecdotal observations that anyone can make. It's likely the market already takes those into account it in its valuations of companies.

The point about compelling investments in the Eurozone (or the UK for that matter) is that the market's view may be too pessimistic, and thus the valuations are too low. But we will only know that in retrospect - we live life going forwards, but reflect on it looking backwards.
Broadly speaking, tech is present in nearly all large companies. Walmart, Dominos, Home Depot, Target, GM, you name it, all have tech components to their operation.

You're right in that I meant Europe does not have companies that have revolutionized digital advertising, consumer electronics, logistics, AI, or cloud enterprise. All of these things have fueled growth in the last decade.

Perhaps Europe will catch up and be the place to be in the future. I am not optimistic that will be the case, but I am not cutting all my exposure to the Eurozone.. but I have never been one to get on board with the idea of exposing 40% of your equities to it. Sometimes market pessimism can be warranted. Europe could very well see decades of stagnation in its markets.

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Re: thoughts on international funds

Post by cashboy » Wed Aug 07, 2019 11:18 am

nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
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Re: thoughts on international funds

Post by jhawktx » Wed Aug 07, 2019 1:41 pm

cashboy wrote:
Wed Aug 07, 2019 11:18 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.

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Re: thoughts on international funds

Post by vineviz » Wed Aug 07, 2019 1:44 pm

jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
cashboy wrote:
Wed Aug 07, 2019 11:18 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: thoughts on international funds

Post by vineviz » Wed Aug 07, 2019 1:58 pm

atdharris wrote:
Wed Aug 07, 2019 9:25 am
You're right in that I meant Europe does not have companies that have revolutionized digital advertising, consumer electronics, logistics, AI, or cloud enterprise. All of these things have fueled growth in the last decade.
This is not an uncommon argument, but it unfortunately isn't actually an accurate one: US productivity growth has been fairly atrocious despite (or possibly because of) the rise of superstar FAANG-like companies.


The “Biggest Puzzle in Economics”: Why the “Superstar Economy” Lacks Any Actual Superstars
The study, explains Philippon, was born out of the disconnect between the prevalent economic narrative, the one that says innovation has never been faster thanks to superstar firms like Google or Amazon leading the way, and the far-less-optimistic reality reflected in the productivity growth data.

“If you go to Silicon Valley and talk to VCs, you get the feeling that things are happening at a faster pace today than ever in history. If you look at the actual numbers, it’s never been as bad,” he says. “There are different explanations for that, but one that people keep repeating is that we have a few firms that are doing great, but the rest of the economy sucks. When you check the data, you find that pretty much everything people say is wrong.”
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: thoughts on international funds

Post by bck63 » Wed Aug 07, 2019 2:13 pm

prd1982 wrote:
Wed Aug 07, 2019 7:18 am
I'm keeping my 25-30% international. However, I found the following recent Morningstar article interesting: https://www.morningstar.com/articles/94 ... areholders

It talks about the doctrine of shareholder value in the US. I do wonder if this has changed how US vs EU stocks have performed.
That is a great article about the nature of greed in our economic system. The wealthy often complain about redistribution of wealth. If the authors of that study are correct, however, wealth is redistributed alright, from the workers to the wealthy, not the other way around. Sad.

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Re: thoughts on international funds

Post by jhawktx » Wed Aug 07, 2019 7:09 pm

vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
cashboy wrote:
Wed Aug 07, 2019 11:18 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.

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Re: thoughts on international funds

Post by Trader Joe » Wed Aug 07, 2019 7:18 pm

smoothnobody wrote:
Wed Aug 07, 2019 4:50 am
i'm holding VTI vanguard total stock market and VXUS total international stock market. i've only been holding for this year but i've noticed a couple things. VTI growth is roughly double VXUS. but when [the market dropped - mod oldcomputerguy] these last couple days they both dropped almost equally. the end result was my VTI was a little over breaking even while my VXUS was in the red a few grand. yesterdays gains pretty much showed the same trend VTI gains had a healthy lead over VXUS. i was looking at the YTD and the average annual returns for all of vanguards ETF and noticed all of vanguards US funds have a history of outperforming the international funds. this made me question whether i want international funds in my portfolio. i understand diversification. if international funds didn't have the same drops US funds do when markets are down, i could see the logic in holding international even if the gains aren't as strong. but when global markets freak out everything goes down the toilet equally. the only difference is international didn't have strong gains to begin with. this makes me think people are holding international just for the sake of diversification when some of us might be better off holding only US funds.
Yes , I agree with your thoughts. I myself only invest in VFIAX (Vanguard S&P 500 Admiral Fund).

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Re: thoughts on international funds

Post by vineviz » Wed Aug 07, 2019 7:26 pm

jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor?
Obviously the answer to this question is "yes".

Next question?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: thoughts on international funds

Post by jhawktx » Wed Aug 07, 2019 7:37 pm

vineviz wrote:
Wed Aug 07, 2019 7:26 pm
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor?
Obviously the answer to this question is "yes".

Next question?
Really? International will outperform the US over the next 180 years. Now if you had said it would outperform over the next 5, 10, or maybe even 20 years then, well, ok...maybe, who knows. But over the next 180 years? Please expand on your thoughts. I'm interested in why a suite of Japan, China, Great Britain, Australia, Venezuela, South Africa, Greece, etc. will outperform the US over the next 180 years.

Then, if you can convince us it will outperform before taxes and expenses, can you convince us it will outperform AFTER taxes and expenses? After all, that is all that really matters, right?

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Re: thoughts on international funds

Post by fujiters » Thu Aug 08, 2019 1:52 am

jhawktx wrote:
Wed Aug 07, 2019 7:37 pm
vineviz wrote:
Wed Aug 07, 2019 7:26 pm
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor?
Obviously the answer to this question is "yes".

Next question?
Really? International will outperform the US over the next 180 years. Now if you had said it would outperform over the next 5, 10, or maybe even 20 years then, well, ok...maybe, who knows. But over the next 180 years? Please expand on your thoughts. I'm interested in why a suite of Japan, China, Great Britain, Australia, Venezuela, South Africa, Greece, etc. will outperform the US over the next 180 years.

Then, if you can convince us it will outperform before taxes and expenses, can you convince us it will outperform AFTER taxes and expenses? After all, that is all that really matters, right?
Why are you assuming otherwise? The US is a single market. There are real risks that any single market will underperform the global market, for any number of unpredictable reasons (policies, disasters, wars, etc).
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

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Re: thoughts on international funds

Post by Northern Flicker » Thu Aug 08, 2019 2:40 am

i've only been holding for this year but i've noticed a couple things...
this made me question whether i want international funds in my portfolio. i understand diversification...
If disappointing performance over a 1 year holding period is causing you this much distress and causing you to rethink your allocation to int’l stocks, why are you invested in stocks at all? Investing in stocks requires a long time horizon.

Diversification of stocks with int’l stocks is a strategy to reduce the risk of long-term (20-30 year) underperformance of one of these two asset classes). Such a strategy cannot be evaluated over 1 year.

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smoothnobody
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Re: thoughts on international funds

Post by smoothnobody » Thu Aug 08, 2019 3:48 am

distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.

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Re: thoughts on international funds

Post by Silk McCue » Thu Aug 08, 2019 6:11 am

smoothnobody wrote:
Thu Aug 08, 2019 3:48 am
distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.
This is what I would call a short sighted long term investing strategy.

Cheers

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Re: thoughts on international funds

Post by tea_pirate » Thu Aug 08, 2019 7:02 am

jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
cashboy wrote:
Wed Aug 07, 2019 11:18 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
Thanks for the laugh!

I haven't seen a post more worthy of saving to reference in the eventual "International: We Told You So" thread, so expect to see this one again in the future.

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Chief_Engineer
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Re: thoughts on international funds

Post by Chief_Engineer » Thu Aug 08, 2019 8:49 am

smoothnobody wrote:
Thu Aug 08, 2019 3:48 am
distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.
No one knows what the future holds. This could be the peak for the US with a crash that doesn't recover for a decade. Take a look at these charts of rolling returns. There have been 10 year periods with negative returns for stocks. It's more likely that you'll see positive gains, but it is not guaranteed.

You need to change your mindset on investing in stocks. Stop checking your balance frequently. Focus on adding as much money as you can, not what your investments are returning. You're coming in on the (possible) tail end of a long bull run for the US stock market. You will probably need some intestinal fortitude to get through the next decade.

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Kemosabi
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Re: thoughts on international funds

Post by Kemosabi » Thu Aug 08, 2019 9:07 am

And when VEU outperforms, the same questions will come up discussing dropping VTI. Stay the course.

lostdog
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Re: thoughts on international funds

Post by lostdog » Thu Aug 08, 2019 9:23 am

smoothnobody wrote:
Thu Aug 08, 2019 3:48 am
distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.

You're not a long term investor. You might as well just stay out of stocks all together. When international out performs, I guarantee you'll jump in.

Good luck...
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

lostdog
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Re: thoughts on international funds

Post by lostdog » Thu Aug 08, 2019 9:26 am

jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
cashboy wrote:
Wed Aug 07, 2019 11:18 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am

It is crazy to expect a diversifier to do nothing but good. A diversifier is going to behave differently, not necessarily better, certainly not better all the time.
statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
This is hilarious. Thanks for giving me a chuckle this morning.

Once again, a great example of throwing the bogleheald principles out the window.
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

asif408
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Re: thoughts on international funds

Post by asif408 » Thu Aug 08, 2019 9:50 am

smoothnobody wrote:
Wed Aug 07, 2019 8:22 am
i know 8 months is not enough time to make any conclusions but when i looked at all of vanguards funds going back to 2004 you don't need to be a pro to see the US has consistently been a better buy. it's like why am i betting on the team that's gotten it's $$$ kicked for the past decade? so i can be holding a winning ticket if the world catches up to the US in the next 5-10 years? makes me feel like i'm missing out on whats going on right now. i heard boggle didn't recommend international and neither does buffet. not sure if this is true but if it is i find that interesting.

thanks for sharing. have a nice day.
OP,

Just remember if you dump international it could have a run like it did from February 2002 through April 2011: https://finance.yahoo.com/quote/VTSMX/c ... In19fX0%3D

Twice the return for international over a 9 year period, and it actually declined less in 2002. From 2002-2007 they actually had closer to 3 times the return of US stocks. The US didn't take over again until 2014 if you started investing in 2002. If you started investing in international stocks anytime between 2002 and 2005 you had at least a 6 year straight period of outperformance. Ask yourself honestly if you wouldn't have a bad case of FOMO if they have a similar run of outperformance in the future.
Last edited by asif408 on Thu Aug 08, 2019 10:23 am, edited 2 times in total.

MotoTrojan
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Re: thoughts on international funds

Post by MotoTrojan » Thu Aug 08, 2019 9:51 am

smoothnobody wrote:
Wed Aug 07, 2019 8:22 am
nisiprius wrote:
Wed Aug 07, 2019 7:25 am
Welcome to one of the most frequently, intensely, and inconclusively debated topics in the forum.
i could tell by the tone in the first few posts. makes me appreciate thoughtful posts like yours.

anyways, i don't have enough experience to participate in this debate. i don't have enough information to form an opinion either way. i'm just thinking out loud and wondering what other people are thinking. when your whole years worth of gains is wiped out in a few days it puts doubt in your mind. i know 8 months is not enough time to make any conclusions but when i looked at all of vanguards funds going back to 2004 you don't need to be a pro to see the US has consistently been a better buy. it's like why am i betting on the team that's gotten it's $$$ kicked for the past decade? so i can be holding a winning ticket if the world catches up to the US in the next 5-10 years? makes me feel like i'm missing out on whats going on right now. i heard boggle didn't recommend international and neither does buffet. not sure if this is true but if it is i find that interesting.

thanks for sharing. have a nice day.
Amazon destroyed US stocks, why aren’t you in only Amazon? Oh wait... Monster Energy CRUSHED Amazon with something like 60,000% in the last two decades, why not 100% Monster?

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Re: thoughts on international funds

Post by Northern Flicker » Thu Aug 08, 2019 12:45 pm

smoothnobody wrote:
Thu Aug 08, 2019 3:48 am
distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.
Except you don’t get to take in the future what you could have received in the past. You will get what the future delivers.

jhawktx
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Re: thoughts on international funds

Post by jhawktx » Thu Aug 08, 2019 1:21 pm

tea_pirate wrote:
Thu Aug 08, 2019 7:02 am
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
cashboy wrote:
Wed Aug 07, 2019 11:18 am


statements of such power and clarity.
Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
Thanks for the laugh!

I haven't seen a post more worthy of saving to reference in the eventual "International: We Told You So" thread, so expect to see this one again in the future.
Which part do you find most hilarious? Is it the part about international being more expensive than US for US investors? It is a true statement of course.

Is it the part about there is no reason to believe the US will do better or worse than international over the next 180 years? Absent a crystal ball I think the safest assumption is they will perform equally BEFORE taxes and expenses. Maybe you get a good belly laugh from that. Not sure why.

Is it the part about a US based investor having to pay more in order to have international diversification? That is
also a true statement of course.

Keep laughing.

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Taylor Larimore
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Re: thoughts on international funds

Post by Taylor Larimore » Thu Aug 08, 2019 1:40 pm

smoothnobody:

You can read my thoughts about international funds here:

How Much International Stock? A Suggestion.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Since my first book, published in 1994, the U.S. S&P 500 Index was to rise by 743%, while the EAFE Index of non-U.S. stocks rose by 237%. If you look at the last 10 years, the correlation between EAFE and the U.S. has been something like 92, that doesn't change your risk."
"Simplicity is the master key to financial success." -- Jack Bogle

tea_pirate
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Re: thoughts on international funds

Post by tea_pirate » Thu Aug 08, 2019 1:48 pm

jhawktx wrote:
Thu Aug 08, 2019 1:21 pm
tea_pirate wrote:
Thu Aug 08, 2019 7:02 am
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm

Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
Thanks for the laugh!

I haven't seen a post more worthy of saving to reference in the eventual "International: We Told You So" thread, so expect to see this one again in the future.
Which part do you find most hilarious? Is it the part about international being more expensive than US for US investors? It is a true statement of course.

Is it the part about there is no reason to believe the US will do better or worse than international over the next 180 years? Absent a crystal ball I think the safest assumption is they will perform equally BEFORE taxes and expenses. Maybe you get a good belly laugh from that. Not sure why.

Is it the part about a US based investor having to pay more in order to have international diversification? That is
also a true statement of course.

Keep laughing.
You're right, international does cost more to hold. A whopping 7 basis points more expensive to hold. How will my portfolio ever recover from that insane 0.11% expense ratio on VTIAX?

I'm genuinely curious here, have you ever left the US? Like for anything more than some tourist trap vacation.

Northern Flicker
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Re: thoughts on international funds

Post by Northern Flicker » Thu Aug 08, 2019 1:55 pm

smoothnobody wrote:
Thu Aug 08, 2019 3:48 am
distress is not the right word. dissatisfaction is more appropriate. i'm not losing sleep. i'm just not happy.

i could be dead in 20-30 years. if i have to wait that long to see meaningful gains with international, debate over. i'll take whatever i can get with the US right now.
But that is not what I said. We don’t know which will outperform the other over the next 20-30 years. Diversification guarantees that you hold some of the underperformer. It also guarantees that you hold some of the overperformer.

patrick
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Re: thoughts on international funds

Post by patrick » Thu Aug 08, 2019 2:02 pm

I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
I think much of the US stocks ballyhoo is because many on this board have lost so much money vs bitcoin over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding US stocks instead of bitcoins.

lostdog
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Re: thoughts on international funds

Post by lostdog » Thu Aug 08, 2019 2:20 pm

jhawktx wrote:
Thu Aug 08, 2019 1:21 pm
tea_pirate wrote:
Thu Aug 08, 2019 7:02 am
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm
jhawktx wrote:
Wed Aug 07, 2019 1:41 pm

Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification.
Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
Thanks for the laugh!

I haven't seen a post more worthy of saving to reference in the eventual "International: We Told You So" thread, so expect to see this one again in the future.
Which part do you find most hilarious? Is it the part about international being more expensive than US for US investors? It is a true statement of course.

Is it the part about there is no reason to believe the US will do better or worse than international over the next 180 years? Absent a crystal ball I think the safest assumption is they will perform equally BEFORE taxes and expenses. Maybe you get a good belly laugh from that. Not sure why.

Is it the part about a US based investor having to pay more in order to have international diversification? That is
also a true statement of course.

Keep laughing.
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

Haeysh
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Re: thoughts on international funds

Post by Haeysh » Thu Aug 08, 2019 3:41 pm

tea_pirate wrote:
Thu Aug 08, 2019 1:48 pm
jhawktx wrote:
Thu Aug 08, 2019 1:21 pm
tea_pirate wrote:
Thu Aug 08, 2019 7:02 am
jhawktx wrote:
Wed Aug 07, 2019 7:09 pm
vineviz wrote:
Wed Aug 07, 2019 1:44 pm


Such a statement should be very easy to support or refute with evidence. Is there any evidence that would support this hypothesis?
Evidence? Instead of that, let's use common sense. Is there any reason to believe international will outperform (BEFORE taxes and expenses) the US total stock market over the period 2020-2200 for a US based investor? If the answer is no, we don't need anymore evidence and common sense will suffice. If it is a wash BEFORE taxes and expenses then the US clearly outperforms AFTER taxes and expenses for the US based investor. How much are you willing to underperform vs US to get your holy grail of diversification? I think much of the international ballyhoo is because many on this board have lost so much money vs the US over the last decade they are bitter and want to prove they were right from a theoretical standpoint. Those people will never in their lifetimes regain the losses they have incurred by stubbornly insisting on holding higher expense funds holding international stocks. Sad, but true.
Thanks for the laugh!

I haven't seen a post more worthy of saving to reference in the eventual "International: We Told You So" thread, so expect to see this one again in the future.
Which part do you find most hilarious? Is it the part about international being more expensive than US for US investors? It is a true statement of course.

Is it the part about there is no reason to believe the US will do better or worse than international over the next 180 years? Absent a crystal ball I think the safest assumption is they will perform equally BEFORE taxes and expenses. Maybe you get a good belly laugh from that. Not sure why.

Is it the part about a US based investor having to pay more in order to have international diversification? That is
also a true statement of course.

Keep laughing.
You're right, international does cost more to hold. A whopping 7 basis points more expensive to hold. How will my portfolio ever recover from that insane 0.11% expense ratio on VTIAX?

I'm genuinely curious here, have you ever left the US? Like for anything more than some tourist trap vacation.
My institutional level shares are just 1 basis point higher. Higher dividend yield then VITPX too!

cheerfulcharlie
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Re: thoughts on international funds

Post by cheerfulcharlie » Thu Aug 08, 2019 3:55 pm

lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.

But, when this fee spread exists, it makes me wonder if someone is trying to play a fast one on me. Maybe they are doing this to trick all the Bogleheads and others who design their portfolios to more heavily tilt internationally than they otherwise would to maximize expenses? Maybe I am just being paranoid?

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Re: thoughts on international funds

Post by visualguy » Thu Aug 08, 2019 7:12 pm

cheerfulcharlie wrote:
Thu Aug 08, 2019 3:55 pm
lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.

But, when this fee spread exists, it makes me wonder if someone is trying to play a fast one on me. Maybe they are doing this to trick all the Bogleheads and others who design their portfolios to more heavily tilt internationally than they otherwise would to maximize expenses? Maybe I am just being paranoid?
It would be a lot more interesting to know how they invest their own personal money rather than other people's money in target date funds.

lostdog
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Re: thoughts on international funds

Post by lostdog » Thu Aug 08, 2019 7:39 pm

visualguy wrote:
Thu Aug 08, 2019 7:12 pm
cheerfulcharlie wrote:
Thu Aug 08, 2019 3:55 pm
lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.

But, when this fee spread exists, it makes me wonder if someone is trying to play a fast one on me. Maybe they are doing this to trick all the Bogleheads and others who design their portfolios to more heavily tilt internationally than they otherwise would to maximize expenses? Maybe I am just being paranoid?
It would be a lot more interesting to know how they invest their own personal money rather than other people's money in target date funds.
Now a conspiracy argument?....wow! :oops:
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

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Re: thoughts on international funds

Post by grabiner » Thu Aug 08, 2019 7:50 pm

cheerfulcharlie wrote:
Thu Aug 08, 2019 3:55 pm
lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.
Since Vanguard is owned by its mutual funds, it doesn't have a profit-making ownership; rather, it prices its funds at cost. The international fund costs more for Vanguard to operate, probably because of more expensive transaction procedures, more record-keeping required (in foreign countries, and managing foreign taxes), and more difficulty replicating the markets.
Wiki David Grabiner

visualguy
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Re: thoughts on international funds

Post by visualguy » Thu Aug 08, 2019 8:21 pm

lostdog wrote:
Thu Aug 08, 2019 7:39 pm
visualguy wrote:
Thu Aug 08, 2019 7:12 pm
cheerfulcharlie wrote:
Thu Aug 08, 2019 3:55 pm
lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.

But, when this fee spread exists, it makes me wonder if someone is trying to play a fast one on me. Maybe they are doing this to trick all the Bogleheads and others who design their portfolios to more heavily tilt internationally than they otherwise would to maximize expenses? Maybe I am just being paranoid?
It would be a lot more interesting to know how they invest their own personal money rather than other people's money in target date funds.
Now a conspiracy argument?....wow! :oops:
Not necessarily "conspiracy". We know that Bogle stayed away from ex-US and wasn't investing his money like the target date funds with their large ex-US component. It would be interesting to know about the others at Vanguard...

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Re: thoughts on international funds

Post by abuss368 » Thu Aug 08, 2019 8:44 pm

Stay the course.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: thoughts on international funds

Post by nisiprius » Thu Aug 08, 2019 9:13 pm

jhawktx wrote:
Wed Aug 07, 2019 1:41 pm
...Given the higher cost associated with international, it is unlikely to perform better than US over the very long term for a US investor. You have to decide if the lower international return is worth it for the additional diversification...
I'm pretty skeptical about international stocks, but I don't think this argument holds water any more. The difference in costs--for big, low-cost index funds--have become, in my personal opinion, negligible.

To take one example, the expense ratios for the Vanguard Total [US] Stock Market Index Fund and the Vanguard International Stock Index Fund, VTSAX and VTIAX, are 0.04% and 0.11%, respectively. 0.07% difference.

To take another one, almost too obvious, the expense ratios for the Fidelity Zero Total [US] Market Index Fund and the Fidelity Zero Total International Index Fund, FZROX and FZILX, are... zero and zero, respectively, representing a difference of... zero.

Even if we get a bit exotic, the expense ratios for the DFA US Small-Cap Value Portfolio and the DFA International Small-cap Value Portfolio, DFSVX and DISVX, are 0.52% and 0.68%, a difference of 0.16%. That's not an awful lot.

It wouldn't take a very high conviction in the value of international diversification to think it might be worth an extra 0.07% or 0.16% on half of your portfolio. To say nothing of zero.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: thoughts on international funds

Post by tibbitts » Thu Aug 08, 2019 9:20 pm

cheerfulcharlie wrote:
Thu Aug 08, 2019 3:55 pm
lostdog wrote:
Thu Aug 08, 2019 2:20 pm
Vanguard has 40% international in their life cycle funds. Do you know more than Vanguard and many other institutions?
Vanguard's expense ratio on their US total stock index fund is 0.04 (or 0.03 for their equivalent ETF).

Vanguard's ER on their int'l fund = 0.11 (or 0.09 for the equivalent ETF).

So, Vanguard is economically incentivized to tilt as much as possible to International as possible (that is, as much as possible while still keeping a straight face). Given this conflict of interest, can we really trust Vanguard's recommendation here? I mean, the more we tilt to Int'l, the more Vanguard makes.

Then again, I realize that Vanguard is owned by its mutual funds, which is in turn owned by its investors, so they are presumably acting in our best interests and supposedly not motivated by mere profit like Vanguard's competitors.

But, when this fee spread exists, it makes me wonder if someone is trying to play a fast one on me. Maybe they are doing this to trick all the Bogleheads and others who design their portfolios to more heavily tilt internationally than they otherwise would to maximize expenses? Maybe I am just being paranoid?
I'm not sure it's an economic incentive for Vanguard to tilt one way or another. Even discounting the "profit" issue, you can't conclude anything from the gross amount/percentage taken in without considering the expenses incurred.

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